Testing for Stationarity Using Covariates: An Application to Purchasing Power Parity
DRMI_Working_Paper_09-04.pdf (1.716Mb)Date
2009Metadata
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We examine the evidence for Purchasing Power Parity using post Bretton Woods exchange rate data for twenty industrialized countries. The two tests we use are covariate tests for stationarity where the null hypothesis of stationarity is tested against the unit root alternative. These tests are generalizations of existing univariate stationarity tests and improve the power of univariate tests by utilizing information contained in related stationary covariates. We conclude that PPP holds for 17 out of the 20 countries tested.
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This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.Related items
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